questions

58. In 2012 Grider Corporation had cash receipts of $28,000 and cash disbursements of $16,000. Grider's ending cash balance at December 31, 2012 was $44,000. What was Grider's beginning cash balance? A) $32,000 B) $40,000 C) $60,000 D) $56,000

A) $32,000

65. In 2012 Grider Corporation had cash receipts of $42,000 and cash disbursements of $24,000. Grider's ending cash balance at December 31, 2012 was $66,000. What was Grider's beginning cash balance? A) $48,000 B) $60,000 C) $90,000 D) $84,000

A) $48,000

17. Otto's Tune-Up Shop follows the revenue recognition principle. Otto services a car on August 31. The customer picks up the vehicle on September 1 and mails the payment to Otto on September 5. Otto receives the check in the mail on September 6. When should Otto show that the revenue was earned? A) August 31 B) August 1 C) September 5 D) September 6

A) August 31

31. Which of the following is the most appropriate and modern definition of accounting? A) The information system that identifies, records, and communicates the economic events of an organization to interested users B) A means of collecting information C) The interconnected network of subsystems necessary to operate a business D) Electronic collection, organization, and communication of vast amounts of information.

A) The information system that identifies, records, and communicates the economic events of an organization to interested users

6. On January 14, Decker industries purchased supplies of $500 on account. The entry to record the purchase will include. A) a debit to Supplies and a credit to Accounts Payable. B) a debit to Supplies expense and a credit to Accounts Receivable. C) a debit to Supplies and a credit to Cash. D) a debit to Accounts Receivable and a credit to Supplies.

A) a debit to Supplies and a credit to Accounts Payable.

26. A T account is A) a way of depicting the basic form of an account. B) a special account used instead of a journal. C) a special account used instead of a trial balance. D) used for accounts that have both a debit and credit balance.

A) a way of depicting the basic form of an account.

27. Adjusting entries are required: A) because some costs expire with the passage of time and have not yet been journalized. B) when the company's profits are below the budget. C) when expenses are recorded in the period in which they are earned. D) None of the above.

A) because some costs expire with the passage of time and have not yet been journalized.

52. Equipment costing $20,000 machine is purchased by paying $5,000 cash and signing a note payable for the remainder. The journal entry should include a A) credit to Notes Payable. B) debit to Cash. C) credit to Notes Receivable. D) credit to Equipment.

A) credit to Notes Payable

44. A company that receives money in advance of performing a service A) debits Cash and credits Unearned Service Revenue. B) debits Unearned Service Revenue and credits Accounts Payable C) debits Cash and credits Prepaid Insurance. D) debits Cash and credits Accounts Receivable.

A) debits Cash and credits Unearned Service Revenue.

45. A paid dividend A) decreases assets and stockholders' equity. B) increases assets and stockholders' equity. C) increases assets and decreases stockholders' equity. D) decreases assets and increases stockholders' equity.

A) decreases assets and stockholders' equity.

46. The double-entry system requires that each transaction must be recorded A) in at least two different accounts. B) in two sets of books. C) in a journal and in a ledger. D) first as a revenue and then as an expense.

A) in at least two different accounts.

41. Prepaid expenses are: A) paid and recorded in an asset account before they are used or consumed. B) paid and recorded in an asset account after they are used or consumed. C) incurred but not yet paid or recorded. D) incurred and already paid or recorded.

A) paid and recorded in an asset account before they are used or consumed.

68. An accounting record that includes a list of accounts and their balances at a given time is called a A) trial balance. B) general journal. C) general ledger. D) chart of accounts.

A) trial balance.

57. Using accrual accounting, expenses are recorded and reported only: A) when they are incurred whether or not cash is paid. B) when they are incurred and paid at the same time. C) if they are paid before they are incurred. D) if they are paid after they are incurred.

A) when they are incurred whether or not cash is paid.

48. Hoosher Enterprises purchased an 18-month insurance policy on May 31, 2011 for $5,400. The December 31, 2011 balance sheet would report Prepaid Insurance of: A) $0 because Prepaid Insurance is reported on the Income Statement. B) $2,100 C) $3,300 D) $5,400

B) $2,100

47. At March 1, 2011, Candy Inc. had supplies on hand of $1,500. During the month, Candy purchased supplies of $2,900 and used supplies of $1,800. The March 31 balance sheet should report what balance in the supplies account? A) $1,500 B) $2,600 C) $1,800 D) $2,900

B) $2,600

72. Winrow Company showed the following balances at the end of its first year: Cash Prepaid insurance Accounts receivable Accounts payable Notes payable Common stock Dividends Revenues Expenses $9,000 500 2,500 2,000 3,000 5,000 500 15,000 12,500 What did Winrow Company show as total credits on its trial balance? A) $25,500 B) $25,000 C) $24,500 D) $26,000

B) $25,000

13. Barnes Company showed the following balances at the end of its first year: Cash Prepaid insurance Accounts receivable Accounts payable Notes payable Common stock Dividends Revenues Expenses $11,000 700 3,500 2,800 4,200 5,400 700 21,000 17,500 What did Barnes Company show as total credits on its trial balance? A) $34,100 B) $33,400 C) $32,700 D) $34,800

B) $33,400

36. Which of the following statements is true? A) Amounts received from issuing stock are revenues. B) Amounts paid out as dividends are not expenses. C) Amounts paid out as dividends are reported on the income statement. D) Amounts received from issued stock are reported on the income statement.

B) Amounts paid out as dividends are not expenses.

16. The accounting equation may be expressed as: A) Assets = Stockholders' Equity - Liabilities. B) Assets = Liabilities + Stockholders' Equity. C) Assets + Liabilities = Stockholders' Equity. D) Assets + Stockholders' Equity = Liabilities.

B) Assets = Liabilities + Stockholders' Equity.

5. On March 1, 2012, Freeze Company hires a new employee who will start to work on March 6. The employee will be paid on the last day of each month. Should a journal entry be made on March 6? Why or why not? A) Yes, the company is now obligated to pay the employee, thus that event must be recorded. B) No, hiring an employee is an important event; however it is not an economic event that should be recorded. C) Yes, failure to record the event would cause the financial statements to be misleading. D) No, the financial position of the company has been changed, however, the dollar amount of the transaction is not yet known.

B) No, hiring an employee is an important event; however it is not an economic event that should be recorded.

51. For the basic accounting equation to stay in balance, each transaction recorded must A) affect two or less accounts. B) affect two or more accounts. C) always affect exactly two accounts. D) affect the same number of asset and liability accounts.

B) affect two or more accounts.

64. The usual sequence of steps in the accounting process is: A) journalize, analyze, post to the ledger, prepare trial balance. B) analyze, journalize, post to the ledger, prepare trial balance. C) journalize, post to the ledger, analyze, prepare trial balance. D) post to the ledger, journalize, analyze, prepare trial balance.

B) analyze, journalize, post to the ledger, prepare trial balance.

40. When a company receives a utility bill but will not pay it right away, it should A) debit Utilities Expense and credit Accounts Receivable. B) debit Utilities Expense and credit Accounts Payable. C) debit Accounts Payable and credit Utilities Expense. D) make no entry until the bill is paid.

B) debit Utilities Expense and credit Accounts Payable.

32. When a company performs a service but has not yet received payment, it A) debits Service Revenue and credits Accounts Receivable. B) debits Accounts Receivable and credits Service Revenue. C) debits Service Revenue and credits Accounts Payable. D) makes no entry until cash is received.

B) debits Accounts Receivable and credits Service Revenue.

63. An expense A) decreases assets and liabilities. B) decreases stockholders' equity. C) leaves stockholders' equity unchanged. D) is basically the same as a liability.

B) decreases stockholders' equity.

75. The purchase of an asset on credit A) increases assets and stockholders' equity. B) increases assets and liabilities. C) decreases assets and increases liabilities. D) leaves total assets unchanged.

B) increases assets and liabilities.

37. Stockholders' equity is increased by A) dividends. B) revenues. C) expenses. D) liabilities.

B) revenues.

20. The cost principle requires that when assets are acquired, they be recorded at A) market value. B) the amount paid for them. C) selling price. D) list price.

B) the amount paid for them.

54. The time period assumption states A) the business will remain in operation for the foreseeable future. B) the life of a business can be divided into artificial time periods and that useful reports covering those periods can be prepared. C) every economic entity can be separately identified and accounted for. D) only those things that can be expressed in money are included in the accounting records.

B) the life of a business can be divided into artificial time periods and that useful

62. Ending retained earnings for a period is equal to: A) Beginning retained earnings + Net income + Dividends B) Beginning retained earnings - Net income - Dividends C) Beginning retained earnings + Net income - Dividends D) Beginning retained earnings - Net income + Dividends

C) Beginning retained earnings + Net income - Dividends

25. Mary Richardo has performed $500 of CP A services for a client but has not billed the client as of the end of the accounting period. What adjusting entry must Mary make? A) Debit Cash and credit Unearned Revenue B) Debit Accounts Receivable and credit Unearned Revenue C) Debit Accounts Receivable and credit Service Revenue D) Debit Unearned Revenue and credit Service Revenue

C) Debit Accounts Receivable and credit Service Revenue

23. Matching refers to A) Recognizing revenue in the period when it is earned. B) Matching the revenue reported on the income statement with the receivable reported on the statement of financial position. C) Letting expenses follow revenues. D) Dividing the life of the business into artificial time periods.

C) Letting expenses follow revenues.

38. A flower shop makes a large sale for $1,000 on November 30. The customer is sent a statement on December 5 and a check is received on December 10. The flower shop follows GAAP and applies the revenue recognition principle. When is the $1,000 considered to be earned? A) December 5 B) December 10 C) November 30 D) December 1

C) November 30

12. Net income results when A) Assets > Liabilities. B) Revenues = Expenses. C) Revenues > Expenses. D) Revenues < Expenses.

C) Revenues > Expenses.

14. Which accounts normally have credit balances? A) Revenues, liabilities, and dividends. B) Revenues, liabilities, and assets. C) Revenues, liabilities, and retained earnings. D) Revenues, liabilities, and expenses.

C) Revenues, liabilities, and retained earnings.

8. Depreciation is the process of: A) valuing an asset at its fair market value. B) increasing the value of an asset over its useful life in a rational and systematic manner. C) allocating the cost of an asset to expense over its useful life in a rational and systematic manner. D) writing down an asset to its real value each accounting period.

C) allocating the cost of an asset to expense over its useful life in a rational and

28. Generally accepted accounting principles A) are accounting rules formulated by the Internal Revenue Service. B) are sound in theory but rarely used in real life. C) are accounting rules that are recognized as a general guide for financial reporting. D) have eliminated all errors in accounting.

C) are accounting rules that are recognized as a general guide for financial reporting.

59. Closing entries: A) are prepared before the financial statements. B) reduce the number of permanent accounts. C) cause the revenue and expense accounts to have zero balances. D) summarize the activity in every account.

C) cause the revenue and expense accounts to have zero balances.

43. Accrued revenues are: A) received and recorded as liabilities before they are earned. B) earned and recorded as liabilities before they are received. C) earned but not yet received or recorded. D) earned and already received and recorded.

C) earned but not yet received or recorded.

67. On a classified balance sheet, companies usually list current assets A) in alphabetical order. B) with the largest dollar amounts first. C) in the order in which they are expected to be converted into cash. D) in the order of acquisition.

C) in the order in which they are expected to be converted into cash.

10. Debits A) increase both assets and liabilities. B) decrease both assets and liabilities. C) increase assets and decrease liabilities. D) decrease assets and increase liabilities.

C) increase assets and decrease liabilities.

7. Accrued expenses are: A) paid and recorded in an asset account before they are used or consumed. B) paid and recorded in an asset account after they are used or consumed. C) incurred but not yet paid or recorded. D) incurred and already paid or recorded.

C) incurred but not yet paid or recorded.

21. An income statement shows A) revenues, liabilities, and stockholders' equity. B) expenses, dividends, and stockholders' equity. C) revenues, expenses, and net income. D) assets, liabilities, and stockholders' equity.

C) revenues, expenses, and net income.

24. The normal balance of any account is the A) left side. B) right side. C) side which increases that account. D) side which decreases that account.

C) side which increases that account.

71. In recording an accounting transaction in a double-entry system A) the number of debit accounts must equal the number of credit accounts. B) there must always be entries made on both sides of the accounting equation. C) the amount of the debits must equal the amount of the credits. D) there must only be two accounts affected by any transaction.

C) the amount of the debits must equal the amount of the credits.

19. The left side of an account is A) blank. B) a description of the account. C) the debit side. D) the balance of the account.

C) the debit side.

La more company had the following transactions Sales of $4,500 on account Collected $2,000 for services to be performed in 2012 Paid $1,375 cash in salaries for 2011 Purchased airline tickets for $250 in December for a trip to take place in 2012 What is La More's 2011 net income using accrual accounting? A) $3,375 B) $5,375 C) $5,125 D) $3,125

D) $3,125

34. Wang Company had the following transactions during 2011: • Sales of $5,400 on account • Collected $2,400 for services to be performed in 2012 • Paid $1,550 cash in salaries for 2011 • Purchased airline tickets for $300 in December for a trip to take place in 2012 What is Wang's 2011 net income using accrual accounting? A) $4,150 B) $6,550 C) $6,250 D) $3,850

D) $3,850

69. At January 31, 2012, the balance in Goebel Inc.'s supplies account was $500. During February. Goebel purchased supplies of $600 and used supplies of $800. At the end of February, the balance in the Supplies account should be A) $500 debit. B) $700 credit. C) $1,900 debit. D) $300 debit

D) $300 debit

53. Adjusting entries are made to ensure that: A) expense are recognized in the period in which they are incurred. B) revenues are recorded in the period in which they are earned. C) balance sheet and income statement accounts have correct balances at the end of an accounting period. D) All of the above.

D) All of the above.

18. Which accounts normally have debit balances? A) Assets, expenses, and revenues. B) Assets, expense, and retained earnings. C) Assets, liabilities, and dividends. D) Assets, expenses, and dividends.

D) Assets, expenses, and dividends.

9. All of the following are characteristics of accounting information except A) Reliability. B) Comparability. C) Relevance. D) Flexibility.

D) Flexibility.

42. The closing entry process consists of closing: A) all asset and liability accounts. B) out the Retained Earnings account. C) all permanent accounts. D) all temporary accounts.

D) all temporary accounts.

39. A balance sheet shows A) revenues, liabilities, and stockholders' equity. B) expenses, dividends, and stockholders' equity. C) revenues, expenses, and dividends. D) assets, liabilities, and stockholders' equity.

D) assets, liabilities, and stockholders' equity.

49. Liabilities are generally classified on a balance sheet as A) small liabilities and large liabilities. B) present liabilities and future liabilities. C) tangible liabilities and intangible liabilities. D) current liabilities and long-term liabilities.

D) current liabilities and long-term liabilities.

30. What is the order in which assets are generally listed on a classified balance sheet? A) current and long-term B) current; property, plant and equipment; long-term investments; intangibles C) current; property, plant and equipment; intangibles; long-term investments D) current; long-term investments; property, plant and equipment, intangibles

D) current; long-term investments; property, plant and equipment, intangibles

35. Dividends paid A) increase assets. B) increase expenses. C) decrease revenues. D) decrease retained earnings.

D) decrease retained earnings.

50. The payment of a liability A) decreases assets and stockholders' equity. B) increases assets and decreases liabilities. C) decreases assets and increases liabilities. D) decreases assets and liabilities.

D) decreases assets and liabilities.

73. The concept that a business has a reasonable expectation of remaining in business for the foreseeable future is called the A) economic entity assumption. B) monetary unit assumption. C) time period assumption. D) going concern assumption.

D) going concern assumption.

55. A revenue account A) is increased by debits. B) is decreased by credits. C) has a normal balance of a debit. D) is increased by credits.

D) is increased by credits.

22. The right side of an account A) is the correct side. B) reflects all transactions for the accounting period. C) shows all the balances of the accounts in the system. D) is the credit side.

D) is the credit side.

4. The Unearned Service Revenue account is classified as a(n) A) asset. B) revenue. C) expense. D) liability.

D) liability.

74. The business entity assumption states that economic events A) of different entities can be combined if all the entities are corporations. B) must be reported to the Securities and Exchange Commission. C) of a sole proprietorship cannot be distinguished from the personal economic events of its owners. D) of every entity can be separately identified and accounted for.

D) of every entity can be separately identified and accounted for.

29. The primary purpose of the trial balance is to: A) disclose the complete effect of a transaction in one place. B) make sure a journal entry is not posted twice. C) transfer journal entries to the ledger accounts. D) prove the equality of the debit and credit amounts after posting.

D) prove the equality of the debit and credit amounts after posting.

56. The best definition of assets is the A) cash owned by the company. B) collections of resources belonging to the company and the claims on these resources. C) Owners' investment in the business. D) resources belonging to a company have future benefit to the company.

D) resources belonging to a company have future benefit to the company.

61. The classification and normal balance of the Dividends account is A) revenue with a credit balance. B) an expense with a debit balance. C) a liability with a credit balance. D) stockholders' equity with a debit balance.

D) stockholders' equity with a debit balance.

1. Which of the following items has no effect on retained earnings? A) Expense B) Dividends C) Land purchase D) Revenue

land purchase

2. Revenue recognition requires A) That revenue be recognized in the period in which it is earned. B) That a company report a receivable on its statement of financial position. C) That revenues follow the expenses. D) All of the choices are correct regarding revenue recognition.

that a revenue be recognized in the period in which it is earned